PM Tony Blairs speech to EU Parliament

l Budget; and that this must allow such a Budget to shape the second half of that perspective up to 2013. Otherwise it will be 2014 before any fundamental change is agreed, let alone implemented. Again, in the meantime, of course Britain will pay its fair share of enlargement. I might point out that on any basis we would remain the second highest net contributor to the EU, having in this perspective paid billions more than similar sized countries.

So, that is the context. What would a different policy agenda for Europe look like?

First, it would modernise our social model. Again some have suggested I want to abandon Europe's social model. But tell me: what type of social model is it that has 20m unemployed in Europe, productivity rates falling behind those of the USA; that is allowing more science graduates to be produced by India than by Europe; and that, on any relative index of a modern economy - skills, R&D, patents, IT, is going down not up. India will expand its biotechnology sector fivefold in the next five years. China has trebled its spending on R&D in the last five.

Of the top 20 universities in the world today, only two are now in Europe.

The purpose of our social model should be to enhance our ability to compete, to help our people cope with globalisation, to let them embrace its opportunities and avoid its dangers. Of course we need a social Europe. But it must be a social Europe that works.

And we've been told how to do it. The Kok report in 2004 shows the way. Investment in knowledge, in skills, in active labour market policies, in science parks and innovation, in higher education, in urban regeneration, in help for small businesses. This is modern social policy, not regulation and job protection that may save some jobs for a time at the expense of many jobs in the future.

And since this is a day for demolishing caricatures, let me demolish one other: the idea that Britain is in the grip of some extreme Anglo-Saxon market philosophy that tramples on the poor and disadvantaged. The present British Government has introduced the new deal for the unemployed, the largest jobs programme in Europe that has seen long-term youth unemployment virtually abolished. It has increased investment in our public services more than any other European country in the past five years. We needed to, it is true, but we did it. We have introduced Britain's first minimum wage. We have regenerated our cities. We have lifted almost one million children out of poverty and two million pensioners out of acute hardship and are embarked on the most radical expansion of childcare, maternity and paternity rights in our country's history. It is just that we have done it on the basis of and not at the expense of a strong economy.

Secondly, let the Budget reflect these realities. Again the Sapir report shows the way. Published by the European Commission in 2003, it sets out in clear detail what a modern European Budget would look like. Put it into practice. But a modern Budget for Europe is not one that 10 years from now is still spending 40 per cent of its money on the CAP.

Thirdly, implement the Lisbon Agenda. On jobs, labour market participation, school leavers, lifelong learning, we are making progress that nowhere near matches the precise targets we set out at Lisbon. That Agenda told us what to do. Let us do it.

Fourth, and here I tread carefully, get a macroeconomic framework for Europe that is disciplined but also flexible. It is not for me to comment on the Eurozone. I just say this: if we agreed real progress on economic reform, if we demonstrated real seriousness on structural change, then people would perceive reform of macro policy as sensible and rational, not a product of fiscal laxity but of commonsense. And we need such reform urgently if Europe is to grow.

After the economic and social challenges, then let us confront another set of linked issues - crime, security and immigration.

Crime is now crossing borders more easily than ever before. Organised crime costs the UK at least ￡20bn annually.

Migration has doubled in the past 20 years. Much of the migration is healthy and welcome. But it must he managed. Illegal immigration is an issue for all our nations, and a human tragedy for many thousands of people. It is estimated that 70 per cent of illegal immigrants have their passage facilitated by organised crime groups. Then there is the repugnant practice of human trafficking whereby organised gangs move people from one region to another with the intention of exploiting them when they arrive. Between 600,000 and 800,000 people are trafficked globally each year. Every year over 100,000 women are victims of trafficking in the European Union.

Again, a relevant JHA agenda would focus on these issues: implementing the EU action plan on counter-terrorism which has huge potential to improve law enforcement as well as address

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